- Japan's Vice Minister of Finance for International Affairs Masato Kanda lifts the threat of actual intervention on Monday and turns out to be a key factor lending some support to the Japanese Yen.
- Kanda said that the movement in the JPY was not in line with fundamentals and was driven by speculation and that authorities will take action against excessive fluctuations, without ruling out any options.
- Adding to this, Finance Minister Shunichi Suzuki reiterated on Tuesday that it is important for currencies to move in a stable manner reflecting fundamentals and that rapid FX moves are undesirable.
- The Bank of Japan indicated last week that financial conditions would remain accommodative and fell short of offering any guidance about the pace of policy normalization, capping gains for the JPY.
- Consumer inflation in Japan remains above the central bank's 2% target, which, along with the positive outcome of spring wage negotiations, supports prospects for further policy tightening by the BoJ.
- The Federal Reserve last week upgraded its real GDP growth estimates to 2.1% by the end of this year from 1.4% projected in December and also raised the forecast for core inflation to 2.6% from 2.4%.
- The Fed, however, signaled that it remains on track to cut interest rates by 75 basis points this year despite concerns about still-sticky inflation and the incoming stronger-than-expected economic data.
- Atlanta Fed President Raphael Bostic said on Monday that he expects the US economy and inflation to slow gradually and anticipates the US central bank to lower the policy rate only once this year.
- Chicago Fed President Austan Goolsbee noted that three cuts in 2024 were in line with his thinking, though the US central bank needs to see progress in inflation and strike a balance with its dual mandate.
- Separately, Fed Governor Lisa Cook said inflation has fallen considerably, though the path of disinflation, as expected, has been bumpy and uneven, while the labor market has remained strong.
- Investors now look forward to the release of the BoJ Core CPI for some meaningful impetus ahead of the US macro data –Durable Goods Orders and the Conference Board's Consumer Confidence Index.
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